Saturday, March 17, 2012

We have read about the level of debt that our town is laden with and of other towns nearby that have no debt whatsoever. Although it is no consolation to Bigastro, there are towns and cities in the Alicante province that are worse off. I read in the Costa Blanca News that three of the main town halls may owe as much as 235 million Euros to their service providers alone.

Benidorm, for example owes 44 million Euros to the company that collects the town’s rubbish. That is a figure far higher than any other town hall owes to a single provider. And the city of Alicante owes 179 million Euros to companies that supply the city and to the financial institutions.

The CB News goes on to explain that the government has ordered town halls to settle their outstanding debts and has offered them a lifeline by way of five year loans at 5% interest once they have produced a list of creditors.

That may seem to be generous but I calculate that if Alicante was to borrow the full amount and pay back monthly, it would have to pay almost 23,700,000 Euros in interest over the term of the loan raising the total cost of the debt to 202,700,000 Euros.

In terms of our town, which Aurelio says owes 35 million Euros in total, the interest paid would be 4,629,600 Euros which represents a huge chunk out of the annual income. Even if we take the lower figure of 17 million that the ex mayor, Raúl Valerio Medina claims to be the case, the interest would be just shy of 2,250,000 Euros.

I reckon that the lifeline offered by the government could turn out to be a noose around the neck for those towns with the highest levels of debt leaving them with little or no money to provide services over the next five years.